How much does it cost to extend a lease?
Specialist lease extension advice is essential if you’re planning to extend your lease. But before you decide to extend your lease, you should be aware of the various costs you will incur when you apply for a lease extension.
Got a lease extension question? Call our specialist solicitors on FREEPHONE 0800 1404544 for FREE initial phone advice.
Although the cost of extending a lease varies according to the remaining term of the lease and the nature of your leasehold property, these costs include:
• your freeholder’s reasonable legal and valuation costs – as the person who started the lease extension process, you will also have to pay your freeholder’s reasonable legal costs (and the cost of the landlord’s own lease extension valuation) as part of the agreement.
However these costs have to be reasonable – your freeholder can’t just charge whatever he or she wants, and if you can’t agree a figure with your freeholder, you have the option of challenging those costs at the First-Tier Property Tribunal [previously known as the LVT or Leasehold Valuation Tribunal]
• the costs of the lease extension valuation report. Some leaseholders think that they can do without a valuation, however, we strongly advise that you need to get a valuation of your property carried out by a qualified surveyor who specialises in leasehold extension valuation advice – because you really need to know the right price to extend your lease.
• the ‘premium’ payable to your freeholder for the lease extension.
What is a lease extension premium?
This is made up of the aggregate of:
The diminuition (or reduction) in value of the freeholder’s interest. This is the value of the landlord’s present interest compared with the value of his interest once you extend the lease
The Marriage value. This is only payable if the remaining term of your lease was below (even just one day below) 80 years when you served the initial lease extension notice on your freeholder. Marriage value is the increase in the value of your flat once you have extended the lease. This ‘profit’ element is only achievable because the freeholder has agreed to grant a lease extension and therefore the freeholder is entitled to 50% of this profit;
Any other compensation due to freeholder.
Lease extension costs – “marriage value” – what’s that all about?
It’s worth noting that there is an extra element that the freeholder can charge as part of the compensation is due, when your lease drops below 80 years – this is the Marriage Value as referred to above. That’s why, if you’re able, it always better to extend your lease before it drops below 80 years, rather than to wait until you have less than 80 years to run, when you will need to pay the additional marriage value premium.
This is yet another reason why it makes sense to extend your lease as soon as you possibly can – to keep the amount of cash you have to pay to your freeholder by way of the premium as low as possible – and therefore to lower the cost of extending a lease overall.#
The importance of appointing the right lease extension valuer
Getting the right valuation of the premium you need to pay is critical. And to do that you’re going to need a specialist lease extension surveyor. Not many surveyors deal with lease extensions. The calculations are technical, and as a result most surveyors have little if any experience in this area and aren’t capable of valuing a premium.
And what’s more, as valuing the premium is an art rather than a science, there are often differences of opinion between valuers for the freeholder and leaseholder. The freeholder understandably wants the highest price – and the leaseholder the lowest.
As a result your surveyor can assist in negotiating the right price with any surveyor appointed for the freeholder. And bear in mind that most sensible freeholders always appoint their own expert surveyor to provide a premium valuation.
Now, over the years, as part of helping over 10,000 people with their lease extensions, we have developed an informal panel of experienced and specialist lease extension surveyors nationwide. And we are happy to introduce you to 1 of them and instruct them on your behalf if you wish as part of our one-stop shop service.
Buying short lease flats as a property investment strategy?
Among our lease extension clients are a number who buy short lease properties as an investment opportunity. If that is something you are thinking of, then it’s worth being aware that we work with a financial adviser who has access to funds as well provide a bridging loan for 100% of the lease extension premium. Contact us for more details.
Want to Know What Your Lease Extension Will Cost? Call FREEPHONE 0800 14045 for Your Free Estimate
On this website we can obviously only give general legal advice about the kind of costs you will need to think about when extending your lease.
However, our team understand that if you’re thinking of extending your lease but not quite sure whether it’s right for you now, or you are simply not sure whether you can afford the cost at the moment, what you really need is a rough idea of how much your lease extension will cost you.
The answer? Simple.
Just call our team now on FREEPHONE 0800 14045 for a free estimate of how much your lease extension is likely to cost – which includes the cost of the premium and the legal and valuation costs.
Our advice – 3 Practical Tips to Keep the Cost of Your Lease Extension down
- make sure you extend your lease as soon as possible – especially before the critical 80 year period
- make sure you appoint a specialist solicitor for the right legal advice
- make sure you instruct a specialist surveyor – so you get the right valuation premium.
Should I save costs by doing without a surveyor and relying on an online lease extension premium calculator?
In a nutshell, our advice is simple – no.
The online calculators rely on very limited information and can only give the vaguest and most approximate idea of the premium you’re likely to pay.
If you try to negotiate with your freeholder on the basis of a premium you got from an online calculator, you won’t be taken seriously – and any sensible freeholder, and their own surveyor, will not what is at best a guesstimate from an online account later seriously.
However, sometimes it can be very helpful to have a very rough idea of the kind of premium that might be involved without going to the expense of a surveyors report.
This might apply, for example, if you’re thinking of buying a short lease flat yourself, and want to know how much it will cost to extend the lease, so you don’t end up paying over the odds for that short lease flat.
If that applies to you, then you might want to try the lease extension calculator which you can find out https://www.lease-advice.org/calculator. The site is run by LEASE, an organisation which was set up in 1994 by the government to provide free information and guidance to members of the public about residential leasehold law.
However even this calculator is limited. For example, it is unable to provide estimates of the likely premium for those leases with under 50 years left (40 years for flats in Central London).And the LEASE site emphasises that it is only an estimate and in their own words “should not be treated as a formal or professional valuation and is not a substitute for obtaining such a professional valuation”
Will a Tribunal application cost me much more?
Fortunately, the vast majority of lease extensions, both formal and informal, are successfully negotiated with the freeholder without the need for an application to the First Tier Property Tribunal. In our experience of many thousands of lease extensions, less than 5% of cases involve any application to a tribunal.
However it does sometimes prove necessary to lodge a “protective application“ with the Tribunal to avoid the risk of breaching the statutory timetable if terms cannot be agreed. However, even in these type of applications, most cases are settled a long time before a hearing is required.
You should be aware that each party is responsible for their own professional fees in relation to Tribunal proceedings. So there is a real incentive on your freeholder to negotiate and agree terms without involving the Tribunal.
What’s more, in most cases where an agreement has not been reached by the deadline date, a the threat of a Tribunal application is often enough to encourage the freeholder to negotiate sensibly and to agree terms. Most sensible freeholders understandably don’t want to put their hand in their own pocket to pay for the costs of a Tribunal application
For Specialist Lease Extension Advice, Talk to Us First. Call Now
Wherever you live in England or Wales, our expert lease extension solicitors can help you.
So for expert FREE initial phone advice and a FREE estimate of the total cost of lease extension
- Call our team today on FREEPHONE 0800 1404544, or
- Send us an email using the contact form below